As prices rise, so too does our credit reliance

0:00A.I. is coming for insurance from American public media. This is Marketplace. In New York, I'm Sabrina Schor in for Kyra's Doll. It is Monday September 7th and we are glad to have you with us. We say it all the time on this show, the engine of the US economy, the force that has kept it chugging along through tariffs and wars and more wars and natural disasters, is the US consumer. However, the engine that's keeping a lot of the US consumers chugging along is credit. Just how much are they leaning on credit? Well, we're going to find out tomorrow when the Federal Reserve reports numbers for July. We do know it has been on something of a roller coaster recently, down in May, up in June, Marketplace's Stephanie Hughes reports. Between May and June, our use of revolving credit grew 6%.

1:04That's comprised mostly of what we spend on credit cards, which meant... Consumers are putting more of their credit card to pay for groceries, gasoline, necessities. Ryan Sweets, Chief Global Economist at Oxford Economics. Those necessities are getting more expensive. Our wages are rising too, though not as fast. And consumers are using credit cards to make up the difference. Now, so far, people generally are making payments on those debts on time. Nothing screams that, in aggregate, consumers under a lot of pressure, but we know that this consumer is very bifurcated. That K again. Higher income households doing well, lower income ones really feeling stretched. And Sweets points out earlier this year, when the war in the Middle East started, tax refunds helped a lot of people deal with the shock of higher gas prices. But Sweets says, those refunds are behind us. Moving forward, people will have to increasingly rely on credit. So then, what happens if something else goes wrong? And if we've learned anything over the last decade or so when it comes to US economy,

2:06something else is going to go wrong. Still the increased spending on credit cards is nowhere near the growth back in 2022, saying Olaf College economics professor Ethan Struby points out that back then, credit card usage went up around 15%. We all needed lots of little treats, right? And probably no surprise that that's when inflation was really high. So people had to pay more to get those treats. Struby says spending on credit cards has moderated since then. What happens next will in part hinge on what the Fed does next. If the Fed raises interest rates, you know, if it raises this federal funds rate target, that does tend to spill over into the credit card rates. It's not perfect. It's not always one for one. But they move in the same direction over time, usually. And when credit card interest rates are higher, it's more expensive to carry a balance. So some people don't use their cards as much. That's according to research from the Boston Fed. You know, maybe they'll instead at the bar from a friend or they'll do sort of a buy-out pay later type thing or they'll just spend less money. And that matters because if they spend less money, that's less demand.

3:10And less demand slows down price growth. Of course, it also slows down the economy. I'm Stephanie Hughes from Marketplace. US stock markets were closed today because it's Labor Day. Oil markets, though, very open. We'll have the details when we do the numbers. Consumers in order to consume need jobs. And the economy on the whole is providing them more than 160,000 fresh new hires in August. However, not everywhere for everybody. In fact, jobs disappeared in a couple industries, including finance and insurance.

4:11In August, that corner of the economy shed 11,000 jobs. So far this year, it's lost 99,000. As Marketplace's Caitlin Tan reports, this has a lot to do with AI. This conversation about jobs in the insurance industry reminds University of South Carolina's Robert Hartwig of the early days of the Internet boom. If I went back to 1999, I could have been doing this exact same interview with Marketplace. This is the first online sales portals for insurance worried the industry. People thought insurance agents would become obsolete. Now here we are 30 years later, and we still have insurance agents. And Hartwig thinks that'll continue. Probably fewer claims adjusters working on fender benders and AI could handle those. But Hartwig says the industry will still need people to handle more complex situations. We hear about, you know, AI is being tested in a sandbox and managing to escape. Is there a way that insurers can provide insurance protection against those types of rogue

5:17behaviors by AI? We don't know yet. Some people are working on it. And they are the ones banks and insurers want to hire. Jobs that require special skills, especially in the cybersecurity area, those are still in high demand. Yelena Schuletzova is with the conference board. She says demand isn't as hot for researchers at banks, which is what she used to do. I see that there's a trend, so it's a smaller research shop because you could do much more with fewer people. But AI may not be the culprit in some of these job losses. University of Wyoming's Julie Hill has observed the contraction in banking jobs since 2022. And that coincides with the rising interest rates. And so some of it we think is probably just pressure on the interest margin and profit margins of these types of businesses. And that isn't likely to let up, especially if the Federal Reserve hikes interest rates

6:17later this month. I'm Caitlin Tan from Marketplace. Remember all those tariff refunds, the government said that it would pay back to businesses after the Supreme Court said a bunch of those tariffs were illegal. Well, those tariff refunds cost the government more than it brought in from new tariffs in the month of May and the month of June and July. We don't have August numbers yet. This is from the tax foundation. About 40% of the $166 billion in tariff money that's supposed to go out has not been refunded as of last month, which means a lot of businesses are still waiting for those checks that they are.

7:18Oh, Nate Axvig of Active, a Scandinavian Active Ware Company based in Denver, Colorado, is one of those business owners. Nate, it is nice to talk to you. It's good to talk to you as well. So I know summer is kind of your slow season, but how are things going? That is putting it well. They're going okay. From a product specific standpoint, we sell a lot of sun shirts. We're in Colorado. The sun is unrelenting. And then we, from a hiking, red rocks, outdoor-ish standpoint, we tend to still make connections, but not like we do during the fall and winter. What is your tariff situation right now? So if you compare it to last year, the rates appear to be about the same. They're just lodged under a different mechanism for charging them.

8:21And the reality is, until you get the bill from DHL or UPS, and that tends to be the two shippers that our vendors use, you don't really know what your rates are going to be. There can be estimates. And sometimes the estimate is high, but most of the time it's low. So our first real shipments will start coming in in about a week and a half. And what happens is you get an email from DHL or UPS, and they say, this amount, and I expect it to be in the 31 to 35% range of your invoice is due now before delivery. Before delivery. Before delivery. Yeah, which is from a cash flow standpoint as a nightmare, that in the past, DHL and UPS would invoice you. So you would have two to three weeks to, as a cushion, but now it is due before arrival.

9:26They won't even release it until you paid. The first run of tariffs, the IEPA tariffs were overturned. And a lot of businesses have said, okay, we applied for refund and we got it. And that was that. That's not your experience. Have you gotten your refund yet? We've gotten a refund. We roughly calculate our IEPA tariffs to be at about 27,000 that we paid. And we've received about three back. But and this is true for many small businesses. We are not the importer of record. For ease, what they do is they list DHL or UPS as the importer of record. So those two companies receive the refunds first from the federal government and then process them and send them back to us. So you're just sort of waiting. And we had hoped we had considered giving refunds to people who had bought things that were

10:30increased in price due to the tariffs. But we still are waiting for about 90% of the refunds. And I don't know that we're going to get them. I don't know. That's wild. So we're just, we've paused that too. Yeah, it is. And I mean, it's not, you know, in post COVID, unless you're an enterprise customer, you can't really talk to anybody about it. Like you get into, you know, they're phone numbers. But it's just, menu tree that goes on forever and you really never talk to a person. And I mean, I'm also running a business. So I don't have time to focus on a rebate. It's an unhauled for four hours. Exactly. I'm trying to sell things that we have that we've already paid the tariffs on. Nate Axpick is the owner of Active Style based in Denver, Colorado. Nate, thank you so much for coming on. Nate, sir, having me and remember that winter is coming. This is what we hope it is.

11:53Mexico makes a ton of cars for the global auto industry. GM, Ford, Toyota, they've all ramped up production there. But Mexico's government wants the country to make more cars for Mexicans. It's launched its own line of electric vehicles under the name Olenia, which means movement and the indigenous Newwaddle language. Ted Seifer has more for Mexico City. American President Claudia Sheinbaum personally rolled out a prototype of the Olenia in June. A compact, almost cartoonish looking box on wheels. The Olenia's appearance is humble, but the ambition behind it is not. So it's that Olenia is the show that Mexico can be more than a recipient of investment, that it can create its own tech-driven industries from the ground up. The vehicle will cost just under $9,000 and will be chargeable through household outlets. It seats six, but with a maximum speed of about 30 miles an hour and a range of 90 miles

12:56per charge, it's geared for local driving, not road trips. I think Olenia is an interesting project. Thomas Cari is a former executive with Volkswagen Mexico and a consultant on the Mexican auto industry. You're aiming for a low cost, low technology vehicle, which is usually not in the portfolio of the automotive industry, not even the Chinese that are here in Mexico are trying to offer this class of bars. Much of the technology under the Olenia's hood, so to speak, will come from China. This comes amid a wave of Chinese imports to Mexican recent years, including popular electric vehicle barons like BYD. All of this has been a sore point for Mexico's largest trading partner at the United States, which has been pressuring Mexico to clamp down on its trade with China. But to keep the price of the Olenia so low, Mexico may have no choice but to rely on existing Chinese technology. The Olenia, after all, aims to be a car of the people. And history shows that Mexicans may be uniquely drawn to this concept.

13:56Volkswagen means the people's car in German. In Mexico and Brazil is where the car really was the people's car. Carlos Pinson owns the Custoday Volks garage in Mexico City. The VW bugs are veritable icons in Mexico, where they are affectionately known as Vochos, and where they remain fixtures in many working class neighborhoods. But Pinson is dubious that the time is right for the Olenia in Mexico, not least because EVs are difficult to fix. People who live in this area, they ask me if I know where can they fix an electrical car, I don't have an answer. The first-year-old test of the Olenia's viability will come next summer. That's when the government says the first vehicles will roll off the production line. In Mexico City, I'm Ted Cifer from Marketplace.

15:04Coming up, learned how to knit and cook every meal I went to the grocery shopping. Knitting is having a moment, but first, let's do the numbers. Most US markets were closed today in observance of Labor Day. In Europe, Britain's footsy stepped down a tenth of a percent. France's CAC 40 picked up a third of a percent, and Germany's DAX subtracted just shy of two tenths of a percent. One market that was not closed for today's holiday, foreign exchange, the Japanese yen hit a seven-month high, investors are betting that the bank of Japan will pick up the pace of interest rate hikes. Oil kept right on trading, too. Brent crude bubbled up one and a tenth percent. West Texas Intermediate Rose, one and a third percent. No bond trading today. The yield on the 10-year tee note is 4.78 percent. You're listening to Marketplace. This is Marketplace.

16:04I'm sorry, Ben Asher. The US labor force is the 170 million people who are out there working a job or looking for one. Making this economy go around. But there is a whole nother group of people who are essential to this economy, even though they do not have jobs. Here's today's installment of our series, Clocked Out. My name is Derek Tisdale. We live in Beaver Creek, Ohio. I am currently the primary caregiver of two children. I've got a four-year-old, just turned four, and I've got one to bow to turn one this month. My wife is doing a medical residency with the Armed Forces, and we are originally from Texas, and that's where I was a firefighter. Then, once we got stationed up here, I decided to leave the fire service. It's temporarily or permanently, we haven't really determined that yet. That's kind of where I've been the last two years.

17:06I did look for work for a while. I looked at teaching with the fire department, but I'd have to travel to do that. I looked at other fire jobs and stuff, but again, overnight shifts and everything just didn't work with my wife's schedule. There's a weird thing for me at least, and I think it happens a lot of people because we were so conditioned to tying your self-worth to a job or more productivity. I'd spent the first year of my time being a stay-at-home dad as just tasking. I don't know, taking care of the house and the yard and improving things in the house. To learn how to knit and cook every meal, I went to the grocery shopping and all that. I still do most of that, anyway, I think I put less pressure on myself to nail it every time.

18:07It's a weird disconnect between I realize what I'm doing is very important, and I'm actually quite proud of it. I really care about my children, and this is a great opportunity to set them on a good course. But there's this disconnect. I really think it's that I was trought as a child, that there should be another side to that, that is an economic side. That's been a bit of a complicated thing to sort out for me, knowing consciously that this is the most benefit I could ever give, and then at the same time not feeling like I'm doing enough. I don't know, so it's a weird feeling. That was Derek Tisdale, stay-at-home dadding, sometimes knitting, in Beaver Creek, Ohio. You can hear more from this series and tell us about your own experience in the labor force or out of it at Marketplace.org slash clockedout.

19:17The Camino de Santiago is a Catholic pilgrimage that started in Spain more than a thousand years ago. There are multiple routes through multiple countries, and they converge in northwest Spain where they lead to the tomb of the Apostle James inside the Santiago Cathedral. These trails have exploded in popularity. Alexis Marshall recently walked the Camino, and shares how all the new foot traffic has affected the economy and the people of northwest Spain. I've been walking since before sunrise, up massive hills, on dirt, and gravel paths,

20:18through forests with little gurgling streams, and past livestock just waking up for the day. I've gone several miles on an empty stomach with no caffeine, and then I see it, a cafe. Outside are half a dozen other pilgrims enjoying their first food and coffee of the day. Now it's my turn. Inside Ana Maria Midas Padreja is pulling espresso shots, making Spanish omelette, and toasting up crusty baguettes. Five years ago, she left her career in health care to open this bar along the Camino, and the pilgrims passing through fuel her business. And the Camino Santiago, in reality, the Galicia is... ...today. She says the Camino is everything for the economy and her region of Galicia, and without it, her family probably wouldn't live here. Maricardman Fernández Lopez owns a hostel along the same route. It's a less common trail,

21:20known as the Camino Primitivo, or the Primitive Way. Her family has been working in hospitality in the village of Okadavo for decades, so she's had a front row seat to the massive increase in pilgrims. 20 years ago, pilgrims passing through her village each year numbered in the hundreds. Last year, there were more than 15,000, and all of those passers-by bring money. She says if somebody comes through the village, you have to think they're bringing your money in their pocket, even if it's just to buy a band-aid at the pharmacy, and that money helps keep jobs in the small town, which has struggled with depopulation. She says the Camino gets these villages life. Not a single person I asked on the Primitive Way saw any downside to the popularization of the

22:21Camino, but that was before this less-traveled path merged with the most popular Camino route, the French way, and it was before I crossed into the final 100-kilometer stretch to the city of Santiago. That's when things get busy, like so busy that buskers set up spots on the trail. At around a kilometer of 48, I meet Lorde's Lopez Amboaje. She has been selling organic fruit to pilgrims from a roadside stand for 26 years. She says the Camino's new popularity has fundamentally changed it. She says the saddest thing is that the true spirit of the Camino has faded, and now it's more tourism than pilgrimage. It's also changed the way she operates her business. She used to leave

23:25out boxes of raspberries from her garden and let pilgrims pay on the honor system. She says nowadays, that's not possible. Yosheke, y uno lo puedo rehater. She says there are way more people walking the trail now, and so there's more danger. And these growing pains are felt by everyday residents too. The noise of large groups early in the morning, all the shops that cater to pilgrims over neighbors and rising housing costs. But those concerns aren't stemming the flow of people each year, who climb the narrow streets into Santiago and pass through a tunnel where there always seems to be a musician playing bagpipes before entering the open plaza and staring up at the monumental church. Last year, more than half a million people completed the pilgrimage in Santiago, and this year is on track to eclipse that record. In Santiago, Spain, I'm Alexis Marshall for Marketplace.

24:50This final note on the way out today, this was in the New York Times, Hollywood took in $4.76 billion at the box office this summer. That is a 9% increase from before the pandemic, way back in 2019. So the movies are back, right? Turns out, no, no, that is all just inflation. Ticket sales in the US are actually down 30% compared to 2019. We are just paying a lot more for them or watching at home. Amir Babawi, Caitlin Esch, John Gordon, Noia Carr, Steve Mollis, and Stephanie Seek are the Marketplace. Editing staff, Kelly Silvira is the news director. I'm Sirbri Beneshore and we'll see you tomorrow everybody. This is APM. I'm Lee Hawkins, host of Must Be the Money, a podcast for Marketplace.

25:55Each week I speak with inspiring entrepreneurs and business leaders about their lived experiences, and they share tangible insights to help guide your path to success. Here from icons like Angelic and Nwandu, Van Lathan, Angela Yee, Matt Barnes, and more about how to seize opportunity, manage money, and meet challenges with resilience. Listen to Must Be the Money, wherever you get your podcasts.